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Price / Earnings Effect of Emissions Reduction
NYU Stern Center for Sustainable Business (CSB) and Valutus developed this tool to help companies quantify the financial market impact of emissions.
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Why This Tool
Attention to the costs and benefits of corporate climate initiatives is increasing — but the benefits side lags behind. Companies quantify the costs of climate action clearly. They rarely quantify the benefits, especially the effect on stock price.
Developed by NYU Stern's Center for Sustainable Business in collaboration with Valutus, this tool estimates that upside using industry benchmarks from the London Stock Exchange Group (LSEG) and Net Zero Tracker, plus research linking emissions to Price/Earnings ratio effects.
Process Overview
How this tool turns your company's profile into a P/E impact estimate.
Stock prices are affected by a company's risk profile, including risk from carbon emissions.
Researchers affiliated with Lazard found that climate risk impacted the price investors were willing to pay for a company's stock.
Range of market value outcomes due to emissions reduction.
Tip: if you're unsure of stock price, EPS, or market cap, a quick search of the term plus the company name almost always returns it instantly. EPS is also in the company's most recent 10-K or annual report.
Scope 1 + Scope 2, in tons CO2e. Used for context on the results page — not part of the dollar estimate itself.
Tip: if you're unsure what to enter, try searching "total GHG emissions [company name]" or check the company's most recent sustainability report.
How This Works
Researchers affiliated with Lazard, Columbia, and Imperial College — in a study covering more than 15,000 companies representing roughly 80% of global market capitalization — found that investors priced climate risk into a company's Price/Earnings ratio, not just its cash flows. Companies with lower emissions traded at higher P/E multiples than otherwise-similar peers with higher emissions.
This tool applies that industry-specific relationship to a company's own stock price, earnings, and market capitalization to estimate the change in market value associated with a 10% reduction in Scope 1 + 2 emissions — the scenario the underlying research measured directly, shown as a range rather than a single point estimate to reflect real variation by company size, transparency, and other factors.
This tool estimates a market-based relationship observed in historical data. It is a directional planning input, not investment advice or a guarantee of future stock performance.
Research Sources
Industry Benchmarks Used in This Estimate
| Industry | P/E Change from 10% Emissions Cut | Median Industry P/E (Reference) |
|---|
Finance was not studied (P/E ratios are less commonly used to value financial-sector companies). Real Estate and Utilities did not show a statistically significant P/E effect in the underlying research.